ICICI Bank: Bitter sweet

Higher provisions have eaten into ICICI Bank profits

ICICI Bank has posted fairly good numbers for the December quarter. While net interest income at Rs 1,166 crore was up a smart 60 per cent y-o-y, other income too chipped in with a growth of 32 per cent.

The increase in total assets in the quarter has been as good as that of HDFC Bank's at 45 per cent y-o-y.

However, higher provisions of Rs 395 crore, up significantly, have eaten into the net profit, which is up just under 24 per cent at Rs 640 crore.

Approximately half of the amount provided is on account of a tightening of norms for standard assets by the central bank, and is a one-time exercise.

The net interest margin has increased by just 10 basis points to 2.5 per cent y-o-y, as also sequentially, since according to the management, some old liabilities continue to impact the margin.

Net non-performing loans are down to 0.8 per cent from 0.97 pr cent at the end of Q2 FY06.

At the current price of Rs 580, the stock trades at around two times estimated FY07 book value, and is attractively valued given the strong pace of growth and the improving quality of the balance sheet.

Satyam Computer: Margins improve

Satyam's revenue growth in Q3 FY06 has disappointed but its operating performance has been fairly good. The top line grew by 9.55 per cent q-o-q to Rs 1265.29 crore, but accounting for the rupee depreciation of 3.7 per cent, the growth is lower.

Operating profit grew by 13.82 per cent q-o-q, with operating margin improving by 93 basis points to 24.86 per cent. This comes on top of a 119 basis points rise in Q2 FY06.

Satyam has managed to improve onsite billing rates by 7 basis points, and offshore billing rates by 3 basis points in Q3 FY06 over September 2005.

Though utilisation rates improved, Satyam was not able to stanch its attrition, which fell by 177 basis points q-o-q to 17.98 per cent.

Without the one-time profit on sale of its Sify investment, Satyam's diluted EPS has risen 13.21 per cent q-o-q in Q3 FY06.

The company revised its FY06 guidance to a 35.7-35.9 per cent growth in revenues and an EPS of Rs 30.31-30.36. The challenge ahead is being able to maintain margins and reduce attrition. At its current price of Rs 743, Satyam trades at a P/E of 20 times FY07 EPS.

Reliance Energy: Spurt in EPC and contracts

Reliance Energy (REL) has seen its operating profit expand 201 per cent y-o-y to Rs 179.34 crore in Q3 FY06. Operating profit margin jumped a massive 1173 basis points to 18.14 per cent in the last quarter.

REL benefited from a sharp improvement in the segment profit margin of its EPC and contracts division, which grew 2830 basis points y-o-y to 29.26 per cent.

In the electrical energy business, unit sales grew about 2.2 per cent y-o-y in Q3 FY06. Meanwhile, average realisations were estimated to have risen by about 8.1 per cent to Rs 4.28 per unit in the December quarter and according to analysts, that's largely owing to the company passing on higher inputs costs such as gas to its customers. The stock appears reasonably valued at about 21.3 times estimated FY06 earnings.

With contributions from Shobhana Subramanian and Amriteshwar Mathur